Apple continues to gain momentum on the back of strong Mac, iPhone sales

2010
has seen the introduction of several new or revamped products for
Apple. We've seen new MacBook
Pros, new MacBooks,
the introduction of the iPad,
a redesigned Mac
mini, and of course the new iPhone
4.

Of
those aforementioned products, the Mac mini and iPhone 4 were the
only ones to be released since Apple's
blowout Q2 2010 results. The Mac mini got flak for its $100 price
increase while we the controversy surrounding the iPhone 4 is
legendary.

Despite
these bumps in the road since April 20, Apple's financial might is
still fully on display. The company announced today that revenue
for the third quarter came in at a record $15.7 billion while
quarterly profit was a healthy $3.25 billion. Those numbers compare
to $9.73 billion and $1.83 billion respectively from the same period
one year ago. Earnings per share came in at $3.51.

Apple
sold 3.47 million Macs during the quarter (33 percent increase from a
year ago), 3.27 million iPads, and 8.4 million iPhones (61 percent
unit growth compared to a year ago). The only downside was the
company's iPod unit which saw sales drop eight percent year-over-year
to a still impressive 9.41 million units for Q3.

Apple
shares are up 3.5 percent in after hours trading.

“It
was a phenomenal quarter that exceeded our expectations all around,
including the most successful product launch in Apple’s history
with iPhone 4,” said Apple CEO Steve Jobs “iPad is off to a
terrific start, more people are buying Macs than ever before, and we
have amazing new products still to come this year.”

Apple
didn't give any guidance to how much “Antennagate” will cost –
the company announced last last week that it would provide free cases
to customers who purchased iPhone 4s and will refund the $30 purchase
price of bumpers that have already been bought direct from Apple.
Apple's free case/case reimbursement program will begin later this
week and will last until September 30.

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Microsoft claim that 50% of all Windows installations are pirated. In 2007 Microsoft announced that 22% of WGA authentications fail, and obviously, most pirates don't authenticate. That may come as a shock to US citizens but many countries openly pirate a lot of software.

So you can reduce that 91% by half immediately, if your interest is how well a company is doing financially.

Regarding the remaining 45.5% you can consider how many of those were a personal choice and not a business PC. I don't have that figure... so if someone does perhaps they could offer it to the discussion. Dell will explain to you how hard it is to make money out of selling business PCs. Apple's 5% looks less significant than it is, in BUSINESS terms.

Consider cellphones as an example. Apple sells about 7% of all smartphones. It's a tiny percentage of the total number of phones. Yet Apple makes more profit from phones than Nokia, the world's leading cellphone manufacturer by numbers.

There is a lot to be said for targeting the profitable end of the market. You can do things like bundle apps to push sales without any of the hassle Microsoft suffered just from bundling a browser.

Apple may be selling only 5% of PCs and a tiny portion of the cellphones but they are taking a serious chunk of the profit out of each of the markets they enter.

Finally, developers have known for years that Apple customers tend to spend more than PC users on software. The Mac community supported a much larger number of shareware developers that their tiny numbers suggested they should, way back in the 90's, even when the company appeared to be floundering.

The iPhone app store continues to bear this out, and statistics from the very recent iAds market shows the same thing. So, again, that 5% is far more significant commercially than number suggests.

Wealth disparities in the USA are currently approaching the levels of the 1920s. Look at these figures from 2008:

Top earners vs National wealth1%=43%10%=70%20%=93%

This is an involved subject, and obviously what people spend on a company's products is not necessarily proportionate to their wealth. Rich people are often very good at accumulating wealth and hesitant to spend it. However, if 93% of US wealth is in the hands of just 20% of the population it makes sense in many situations to target that, and there are serious diminishing returns about chasing that last 7% (especially when you consider that levels of DISPOSABLE income make the disparity even greater).

You may not like Apple's products, or some of the company's decisions, but that's not the point: I can assure you that many companies are working assiduously to try to emulate much of their business strategy. 4000% growth in 10 years doesn't go unnoticed.

wow, that was a whole lot of typing, cutting and slicing you put into that.

Yes, Apple makes plenty of money. I didn't say they didn't, and I don't dislike their products as you inferred. But 5% is 5% and it isn't increasing. The past several years it went from 3% to 5%, and that is about all Mac will ever get... Unless they come out with something far better, far cheaper, or at least open platform and compatible with the rest of the world. With the $$$ they are making, I doubt they ever will, and that is fine, nothing wrong with it. And you cannot just discount business PC's, because they are built, and paid for just like a home PC. They are used even more, generally 8+ hours a day every day M-F at a minimum.

What is even your point by all this? You feel that the true # of 5% of the worlds PC's are Mac needs explanation? So you eliminate business PC's, pirated PC's and then low end cheap PC's? That's like me saying, if I dont count all the college graduates, and poor people that may not have been able to afford to go to college, then I am one of the smartest 1% in the world. Pointless... What does that get you? 5% is still 5%, and that isn't a bad thing.

I think it was your comment that Mac account for only 5% of computers worldwide. Considering the following comment:

retrospooty:"But 5% is 5% and it isn't increasing."

I think you are suggesting that the products lack marketplace significance. Perhaps you think developers will not be attracted to the platform.

So I suggested that Apple's customers have money to spend and explained how that has sustained a productive community in the past.

To cover the possibility that you were suggesting that the 5% sales figure suggests the company is failing I showed how it is profitable. Today Goldman Sachs pointed out that the iPhone alone makes more profit that Nokia, RIM, Sony Ericsson, HTC and Motorola COMBINED.

So the point is two-fold:Apple's strategy is profitableApple's products are relevant to developers

As for Apple's portion of the market not growing: you contradicted yourself. Apple sold about 2% of the world's computers in 1997. Now it sells 5%... but it also sells the iPod Touch, iPhone and iPad. Those are relevant in certain circumstances: the browser, for example. Safari has to be targeted because you have to add about 25 million computers to about 50 million working iPhones and iPod Touches. And now you have to add over 3 million iPads.

It only goes to Q3 2010... but you see that all but the iPod numbers are growing. What it doesn't show is iPad sales booming. It does show Apple selling over 10 million Safari using products in a single quarter. It also shows that next quarter, Christmas, is the big one. So Apple is shifting over 40 million internet enabled devices a year.

And those are going to a market that has on average more money to spend than PC users.Not irrelevant & immensely profitable.

As for my point about Microsoft: the 5% market share figure suggests Apple is irrelevant.

The reality is that the company is growing faster than Microsoft, makes less profit as a percentage of revenue but almost exactly the same revenue and is valued higher than Microsoft by the market because investors expect it to grow bigger than Microsoft.

That will probably happen in the next quarter. Apple will probably make more revenue, more profit and have a higher market cap than Microsoft after the Christmas quarter.

Microsoft will probably always make more profit as a percentage of sale price than Apple, because their product mix contains more software and services, as opposed to hardware, than Apple.